Oil up $1 above $57 on U.S. demand
Reuters | June 17, 2005
By Iain Pocock
Oil prices leapt to their highest level in more than two months on Friday, climbing above $57 a barrel and extending a week-long rally spurred by strong demand in defiance of near record fuel costs.
U.S. crude oil <CLc1> climbed $1.02 to $57.60 a barrel, near a session high of $57.80, the strongest level since early-April when crude set an all-time peak of $58.28.
London Brent futures <LCOc1> traded 77 cents higher at $56.99 a barrel, near a record $57.32 also set in April.
Prices rallied after U.S. data this week showed consumption of transport fuels was brisk, raising concerns about refiners' ability to meet peak summer gasoline demand and to build heating and diesel inventories for later in the year.
"There's still high demand, despite the fact that oil's been quite expensive," said Sam Tilley, head of research at brokerage Sucden UK Ltd. "If there is bigger demand than currently, especially later in the year, will the refineries be able to handle it?"
Demand for gasoline over the last four weeks is up three percent from a year ago, while consumption of distillates -- diesel, heating oil and jet fuel -- has risen by 6.5 percent, U.S. government data showed this week.
At the same time, refiners are already operating close to maximum capacity.
U.S. gasoline was the biggest gainer on Friday, rising by 4.22 cents to $1.6400.
With U.S. crude oil inventories still nine percent above last year, dealers are less worried about raw material supplies than a thin cushion of spare output capacity.
Strong demand from China, as well as from the United States, has increased strain on the world's limited refining capacity, triggering concerns that supplies -- particularly of distillates -- will be tight during the winter, when demand peaks.
The Organization of the Petroleum Exporting Countries (OPEC) this week agreed to raise its production ceiling by 500,000 barrels per day from July and put another 500,000 bpd on the market soon if prices remained high.
But Saudi Arabia, the only member with significant production capacity to spare, appeared wary of forcing more crude on to refiners who say they have more than enough.
"We are ready to supply more crude," Saudi Oil Minister Ali al-Naimi told Reuters. "But get us the customers."